Video Deep Dive: Complaints & Local Businesses, Making the Most of a Bad Situation
Mike Blumenthal


This is the 22nd installment this year of our Deep Dive Into Local series. For the week ending Monday, June 13th, Mary Bowling and Mike Blumenthal shared their thoughts about the previous week in local. The complete video, including links and commentary on critical happenings of the previous week is posted in the Local U forums (paywall). In the second half of that video, they take a deeper strategic and tactical dive into one interesting area that caught their attention during the week.

In this discussion Mary and Mike talk about customer complaints, how most customers never express them and how — by proactively seeking feedback — a business can achieve a very high ROI by resolving complaints successfully.

Mary: And now Mike has been doing some research and writing some articles on complaints and complaint resolution. And we’re gonna address that in our deep dive today.

Mike: So I did an interesting consumer survey, and I’m writing a series of articles. I’ve got two done at GetFiveStars* and the other two are coming out this week, and I think I have another four beyond that in this series. And it has become clear to me that complaints…that a business needs to approach complaints from a systematic, process-driven way with a plan in place. Because there is an incredible ROI on most complaint resolution. What we see is that…somewhere between 75% and 90% of people who are unhappy don’t complain at all. And some of them, a few of them, return to do business with you, but probably with a grudge. But many of them just leave, and some of those that leave, leave a bad review. So, given the fact that most people that are unhappy don’t say anything, and some of them leave a bad review, that obviously is very costly, because your future customer is leaving you. And your future customer, research shows, is worth 10 times as much as your current…10 times as a prospect, in terms of what they’re likely to spend or first time customer.

So most people will leave without saying anything. But if you ask them, my research shows, that almost 95% will tell you that they have a problem if you’ve reached out to them in some form. And of those people — and if you resolve these problems, 70% will continue to do business with you. So again, if this research shows that this customer who is a loyal customer is worth 10 times the first-time customer, retaining these customer not only stops bad reviews, but provides incredible ROI. And so the conclusion I’m coming to is that every business needs to, one, think through their complaint system; two, become very complaint receptive; and three, have a [complaint] plan in place so that it is — that it isn’t impersonal, but that it is…that you anticipate it and are ready for it.

Mary: So, how would you suggest that a business goes about, more or less, asking for complaints. Most of us have a feeling, and we’ve discussed this in LocalU, where you get something that isn’t absolutely five-star comment in our surveys, and we say well, we ask them to tell us what they didn’t like. So are businesses opening themselves up for just people looking for things to complain about, or how would you suggest that they solicit complaints, more or less?

Mike: Right, so under the ideas of making a business complaint friendly, I think one…several ideas, we talked about this a number of months ago. For example, you could post an SMS text number around your store with a clear indication that people can text it with a question or a complaint. Two, you could have a form on your website that does the same thing. Three, you could have a shortened URL that takes people to a feedback form. Four, you could use something like GetFiveStars to do a net promoter score survey of every customer to elicit [feedback and] complaints. The reality is that complaints happen. Most businesses don’t know about them, and you’ve lost that customer. And so while it may surface some grumbling and some irrational complaints, for the most part it surfaces useful information. And for example, in the insurance industry, I was talking to Alan Kaplan, and in the insurance industry, you have a real problem, because once the insurance agent sells it, the national company fulfills the policy. Some third-party appraiser comes and assesses the damage, and a different division of the national company then fulfills the claim, right? So, you can have problems in any of those ways, and this insurance agent, who doesn’t talk to that customer ’til next year, would never know about it. And he’s not even responsible, yet he’s gonna take the brunt of that, and lose the sale.

Mary: Yeah, and he’s probably the one that’s going to get poor, a bad review online because of it, too, and it’s something that he had no control over.

Mike: Absolutely. No control over. So he implemented GetFiveStars, and in doing so, has surfaced these kinds of complaints, and he fixes them right away, or if he can’t fix them, he advocates on their behalf to the company. So, sometimes you can’t fix a complaint. Sometimes the complaintant is totally irrational. But usually, complaints — and you know the research shows that most complaints, most people are unhappy about bad customer service or rude employees. That’s like 60% of dissatisfaction with businesses fall into those two big categories. And the rest sort of breaks out into, not available stock, not knowledgeable staff, prices too high. But those are two, three, four percent, whereas these two, you know, rude employees and bad service are roughly in the 25%, 28% range each, so significantly more.

Mary: People may wanna think about instead of saying…they might wanna think about the way they frame their request. Something like, “Do you have any suggestions about how we can improve our business?” And then it looks to me at least that you’re not really fishing for complaints, you’re fishing for ways I can make things better. And that probably resonates more with people as well.

Mike: No, I think that’s absolutely true. I don’t think you actually are looking for complaints, you just want people to know that you’re willing to hear them, and you want to be sure to give them an opportunity, like you said, in some way, to be able to give that to you easily on the channel they wanna give it to you. And you’ve pointed out in the past just even listening on these channels is probably a critical element of this “being open to the idea of complaints”, where you can find them wherever they’re occurring, right? Because some of them are occurring in public and you need to know about that. Particularly those.

Mary: I think Mike’s series is what, gonna be eight or nine articles?

Mike: I haven’t finished yet…I’m cranking through them, but it’ll be two a week for the next three or four weeks at least. So we have two out, there’ll be two this morning, this week, and then at least another four after that.

Mary: Well, then I can see us revisiting this subject again in the near future.

Mike: Sounds good. So with that, we’ll call this a wrap. Have a nice a day Mary, and we’ll talk to you next week.

Mary: Thank you, bye-bye.

*Mike is a co-founder and principal at GetFiveStars.

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